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Occidental board denies there's infighting in executive suite

But the board makes clear that Executive Chairman Ray Irani and CEO Stephen Chazen, who have run Occidental for the last decade, are on their way out.

April 09, 2013|By Ronald D. White, Los Angeles Times
  • Ray Irani, shown in 2005, left his post as Occidental Petroleum's chief executive in 2010 to become executive chairman.
Ray Irani, shown in 2005, left his post as Occidental Petroleum's… (Bob Chamberlin, Los Angeles…)

For several days, Occidental Petroleum Corp. has been roiled by speculation that its CEO search was really a power play by Executive Chairman Ray Irani to push out his onetime protege, Chief Executive Stephen Chazen.

On Monday the Westwood company's board of directors took the unusual step of saying there is "no fight at the top" of the oil and gas producer, but made clear that the two men who have run Occidental for the last decade were on their way out in one way or another.

The board's statement, billed as unanimous, went on to say that the 78-year-old Irani played no role in the February decision by independent directors to identify a successor for Chazen, 66. Chazen acknowledged Monday that he didn't ask to leave Occidental but said, "I respect the board's decision to seek a new generation of leadership."

The curious missive from the board is the latest twist in a corporate drama that involves a blindsided CEO, divided shareholders and rampant market rumors.

The board's statement followed a story last month in the Wall Street Journal citing unnamed sources who said Irani and certain directors, unhappy with the company's performance, had mounted a surprise attempt to oust Chazen and replace him with a former Occidental executive.

Longtime Occidental shareholder Steven Romick, managing partner of First Pacific Advisors in Los Angeles, went so far as to issue a letter Friday stating that many Occidental investors were "troubled by the infighting in the corporate suite." He urged Occidental's board to keep Chazen, adding: "This is the wrong time to transition to a new CEO."

But Occidental's board said Monday that the decision to seek a new CEO came about because of the need for long-term succession plans during challenging times for the company, including disappointing stock performance.

"All decisions regarding CEO succession planning were made over many meetings by the independent directors alone in executive session.... Dr. Irani did not attend and did not play any role in these meeting deliberations," the statement said. "There were no schisms, no philosophical divisions in the directors' decision."

In addition, the statement quoted Irani as reaffirming his plans to retire at the end next year.

Occidental shares have taken a beating while other oil companies and the market in general have been on the rise.

The company's stock lost nearly one-fifth of its market value in 2012 as costs escalated and oil production growth failed to meet expectations. Occidental shares fell 73 cents Monday to $81.12.

Analysts said the Occidental board statement was unlikely to quell confusion among shareholders over the company's plans.

"It's a mess at the top," said Fadel Gheit, senior energy analyst at Oppenheimer & Co. "I have never heard of a board of directors who starts a succession plan when the CEO is already past retirement age."

Gheit called the Occidental board an insular boy's club that desperately needed an infusion of new blood.

"The board needs to be replaced. It is too old and too stale," Gheit said.

Phil Weiss, an analyst at Argus Research, said he would feel better about the search for a successor to Chazen if it were really based on a desire to find new leadership for the company for the next 10 years.

"I just hope it's not a desire to dump him after one bad year," Weiss said.

Irani left the CEO post in 2010 to become executive chairman, and Chazen, then the president and chief operating officer, was named chief executive. That year Occidental announced plans to identify a successor to Chazen, but apparently never did that.

Attempts to obtain further comment from Irani, Chazen and directors were not successful. A spokesman, Dale Petrosky, said "no board members are available at this time."

For his part, Chazen said in the Occidental board's statement that "for the good of the company, its shareholders and its employees, I will assist the board in their search and in the transition. In the meantime, I will continue to do my job."

The company's upcoming first-quarter earnings report is expected to mirror that of much of the oil industry, which has seen lower oil prices so far this year.

Among oil companies, few have been run like Occidental, which has seen comparatively few people at the helm. Armand Hammer, one of the original oil industry giants, ran the company for decades.

Irani was 76 when he finally stepped down as chief executive.

Analyst Weiss said Occidental executives were to blame for confusion over the company's plans.

Occidental's management, unlike most of the major oil companies, "doesn't appear at a lot of conferences and analysts' meetings," Weiss said. "That has invited speculation, people trying to put dots together."

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